JITRADE SAFER WITH CONDITIONAL LOGIC

Your Trades Are at Risk — How to Set Conditional Stop Losses in Thinkorswim (Step-by-Step Guide)

Learn how to automate smarter exits in Thinkorswim using conditional stop losses — so you can protect capital and trade with confidence.

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Most of us traders have probably used a stop-loss in the simplest way possible. If the price of whatever asset I am holding hits this level, I’m out. That’s it.

But Thinkorswim actually lets you set conditional logic. Meaning, if this situation happens, then stop me out. And it doesn’t necessarily have to be tied to the price at which you bought or sold the asset.

So, in this video, I’m going to show you exactly how to set conditional stop-losses for options trades on the Thinkorswim web platform. I’ll show it to you step by step, where the logic lives, and then some examples of how it actually works in the real world.

All right, before we get started, clicking on any buttons, let’s talk about terminology. A normal stop-loss trigger is purely based on price.

So, let’s say that I buy an option for $1. I’ll go and set a stop-loss for 50, meaning if that falls to 50 cents or lower, I want to get stopped out, no questions asked, and I lose half of my initial investment on the option.

A conditional stop-loss still is a stop-loss, but it only becomes active when a specific condition is met or is true.

That condition could be an underlying price of the same symbol.

So, let’s say that I’m trading SPY, and I really like this support level at, you know, $600. And as long as we stay above that, I want to stay in my position.

But my option premium is going to be very volatile depending upon news, depending upon time decay, etc. I don’t want that to be the reason why I get stopped out.

I can use the underlying price of the spy instead of my option price to get stopped out. Might even be the time of day that you want to get out by.

Think of it like adding an if this happens statement to your stop-loss instead of just saying when this price hits, take me out.

Okay. So, first, I’ll show you how it works normally with a regular stop-loss.

So, let’s jump into SPY. We’re looking at SPY right here. And what I’m going to go to is the option chain.

I could play, I guess, off of uh the current day, but I’ll go to tomorrow cuz tomorrow’s Friday.

Let’s pull up the January 16th options. And I’m going to pull up the option chain here. Let’s go down to or let’s look on the call side, which is this left hand side.

And currently, SPY is trading at let’s see where SPY is currently trading uh, just below 695.

So if SPY is currently just below 695, let’s say that I wanted to buy the 695 calls for essentially expiring tomorrow.

So I click on the bid there. Now it’ll open up this order entry at the bottom of our screen.

So what we’ll see is we have a sell, which I’m going to change to buy. So buy on 10 January. I’m not going to buy 10. I bought one for the example in this video.

Because this is not basing off of any trading strategy, as I’m just showing you the example.

So, it’s totally risky and kind of stupid to just risk, you know, 10 contracts for no reason.

So, let’s say I wanted to get with a market order. I’ll go to the market right here so we can get filled right away.

And so, I’m bullish. Let’s just say I’m bullish on SPY. I think we’re going to go higher.

So, I’m going to click on this review. It’ll give me a quick second to see what’s happening here.

So, it tells me the current price, how much it’s going to cost me, my resulting stock buying power, and options buying power.

I just put $500 into this account. So, I’m doing this for the sake of this video so we can see how this all works to make it super clean, super easy.

There’s nothing else going on in this account. So good. Everything looks good to me.

I’m going to go in with a market order and send that off. Up in the top right just got filled.

And we got that little nice little ringtone. We’re good to go.

Now, we have if I go back to an option chain, we’ll see on the chart we have a plus 695 call, meaning that’s what we have a current position in.

We’ve got our option chain here. If I scroll down, you’ll see this little triangle in green, meaning we have a position on that 695 call.

And so everything looks good. We’re in the position, but we have no stop-loss and no take-profit. None of that is set.

I’m going to bump the watch list over so we can see this better. And we can see my position on the right-hand side.

So I’m currently up $10 on the day, as we can see right there. It shows me my year-to-date P&L, open P&L, and then the day P&L.

When I pull this drop-down, we’ll see our plus one, meaning we have one contract of that spy 695 call.

So to make it simple, I’ll go inside my spy trade section right here in the middle, and I’m going to click on where it says close selected.

Click on close selected. It’s not going to close it out just yet, but then we’ll see at the bottom, it pops up the next order or an order option here.

So, this is going to allow me to sell with a limit order, but what I’m going to do is I’m going to go down and click on stop order.

So, this is how I would traditionally do this. I have it set today, which means this will expire at the end of today.

So, I bought this contract for $156, meaning it was 156.

So, let’s say that I no longer want to lose on this trade. I’m going to bring my stop loss down to 156.

Actually, I’ll make it 157 just for the sake of giving it that extra 1-cent spread or that one-cent cushion.

And I’ll click on review. Now, I’ll be able to review this. It’ll tell me my credit score that I’m going to get back.

And then I will send the order out. And that is just a stop-loss, a traditional stop-loss order at that price.

Click on send. And we’re good. The order has now been submitted.

We can now see underneath all of our spy trades, we have a working order indicated by these dashed triangle lines right here.

And if I were to go over to where it says working, which we can see by those dashed lines, not a solid triangle.

We can see our working order that is just sitting there. We’re waiting for the price to come down to that spot, and then it will execute.

If it never does, we’ll just stay in. Nothing will happen.

So, I’m going to select that order, and I’m going to click on cancel selected order just for now.

Okay. So now we no longer have any working orders because what I want to do is I want to set a condition-based stop-loss.